SEC Trends & Developments - Summer 2011 - Accounting Standards Update
OTHER EXPENSES: FEES PAID TO THE FEDERAL GOVERNMENT BY HEALTH INSURERS (ASU 2011-06)
The guidance in this ASU codifies a consensus reached by the FASB's Emerging Issues Task Force (EITF) at its June 2011 meeting. That consensus addresses how health insurers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act ("the Acts"). The Acts impose an annual fee on health insurers for each calendar year beginning on or after January 1, 2014. The EITF reached a consensus that the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation or other method ratably over the calendar year that it is payable. The guidance updates Topic 720 and is effective for calendar years beginning after December 31, 2013, when the fee initially becomes effective.
STATEMENT OF COMPREHENSIVE INCOME (ASU 2011-05)
On June 16, the FASB issued a final standard requiring entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. The option to present items of other comprehensive income in the statement of changes in equity is eliminated. As a result, the presentation of other comprehensive income will be broadly aligned with IFRS (see article An Update on International Financial Reporting Standards). The new requirements are effective for public entities as of the beginning of a fiscal year beginning after December 15, 2011 (including interim periods) and for non public entities for fiscal years ending after December 15, 2012. The new IFRS requirements are effective for fiscal years that begin on or after July 1, 2012. Early adoption is permitted. Full retrospective application is required under both accounting standards.
FAIR VALUE MEASUREMENT: AMENDMENTS TO ACHIEVE COMMON FAIR VALUE MEASUREMENT AND DISCLOSURE REQUIREMENTS IN U.S. GAAP AND IFRS (ASU 2011-04)
In May 2011, the FASB issued this ASU 2011-04, and the IASB issued International Financial Reporting Standard (IFRS) 13, Fair Value Measurement (together, the new guidance). The new guidance amends U.S. GAAP and is a new standard under IFRS. The new guidance results in a consistent definition of fair value and common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. For many of the amendments to U.S. GAAP, the FASB does not expected to have a significant effect on practice. Some of the amendments clarify the Board's intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements; the new guidance changes some fair value measurement principles and disclosure requirements. The key changes to U.S. GAAP include: (1) application of the highest and best use and valuation premise concepts; (2) measuring the fair value of an instrument classified in a reporting entity's shareholders' equity; (3) measuring the fair value of financial instruments that are managed within a portfolio; (4) application of premiums and discounts in a fair value measurement; and (5) additional disclosures about fair value measurements.
For public entities, the ASU is effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. Non public entities must adopt the new guidance in annual periods beginning on or after December 15, 2011 but may choose to apply it in interim periods beginning after December 15, 2011. IFRS 13 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. The new guidance will require prospective application.
SEC Trends & Developments - Summer 2011 Issue